LECTUREPEDIA - Ajarn Paul Tanongpol, J.D.; M.B.A.;B.A.; CBEST
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LECTUREPEDIA - Ajarn Paul Tanongpol, J.D.; M.B.A.;B.A.; CBEST
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Strategic Management
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i. Mission ii. Core values iii. Objectives
i. Industry competitors ii. New entrants iii. Suppliers iv. Customers v. Substitutes
i. Business strategy ii. Functional strategy
i. Growth ii. Concentration iii. Diversification iv. Vertical integration
i. Rerenchment ii. Restructuring iii. Downsizing iv. Divestiture
i. Differentiation ii. Cost leadership iii. Focused differentiation iv. Focused cost leadership
i. BCG matrix ii. GE business screen
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Strategy is defined as a comprehensive plan guiding resource allocation to achieve long-term organization goals. Can there be a case where strategic planning does not involves resource allocation, but involves the aiming to achieve long-term corporate goal? In a case of networking, what corporate resource do we expend? At most it is minimal, yet it is part of the over all corporate strategic planning to have as many contacts as possible to help achieve its goals.
Strategic intent focuses and applies organizational energies on unifying and compelling goals. This is corporate commitment to achieve corporate objective.
i. Strategic management is the process of formulating and implementing strategies. This definition is too skimpy.
ii. Management involves three functions: organizing, planning and controlling. The definition of strategic management should encompass these three elements: 1. Organizing: the corporation should organize its resources in such a way so as to mobilize its energies towards achieving the corporate long-term objective.
2. Planning: Strategic management requires a long term plan. This master plan must be clear and flexible. The requirement of clarity allows all participants to know exactly what the organization tries to achieve in the long run. The Flexibility element of this strategic planning allows the organization to adjust its goals, objective, and resource commitment according to changes in circumstance.
3. Controlling: Part of this control function to ensure that everything must go according to plan.
i. Michael Porter argues for superior profitability as the ultimate goal for strategic management. However, this is contrary to modern and current management outlook. Although profit is part of the overall strategic goal of the company, current management theory now encompasses the human element into the equation: human capital, welfare of workers, ethical soundness, etc.
ii. In today’s global economy, we are faced with hypercompetition. If this is true than Michael Porter’s emphasis on profitability is wrong. See (i) above.
Strategic management is successful when the organization gain profit and sustain that profit over time in a hypercompetitive environment. In order to be successful in strategic management, the following must be present: (1) strategy formulation, and (2) strategy implementation.
i. Mission ii. Core values iii. Objectives
i. Industry competitors ii. New entrants iii. Suppliers iv. Customers v. Substitutes
i. Business strategy Describes the strategic intent to compete within a specific industry or market.
ii. Functional strategy This is the guidance on the use of the organization’s resources within a specific functional areas or units.
i. Growth àààààààà Expand ii. Concentration àààààààà Focus iii. Diversification àààààààà Reduce risk iv. Vertical integration àààààààà Channel control 1. Forward vertical integration 2. Backward vertical integration
i. Retrenchment 1. The expansion of the business may meet challenges that the management is not able to resolve. Continue in that same cause will cause the company to fail. One solution is to retrench or curtail expansion and re-focus on the core business of the company.
2. There may be two sources of the causes for retrenchment: (1) the company may be expanding to fast and spread its resources too thin. The management is cannot cope with the problem of growth. (2) Retrenchment may come from changes in the market. Outside threats posed from competitors or changes in the market condition forces the company to rethink its operation and change its strategy, or downsizing.
ii. Restructuring 1. Changes in sizes, i.e. reduction of staff, to increase efficiency. The company may be too fat and wasteful in resource allocation. The purpose of restructuring is to improve performance and returns to profitability, if the company is losing money.
2. Restructuring may also come about as a result of a change in ownership. For instance, when a company is merged or acquired by another entity. The dominant entity may restructure the acquired entity in order to achieve uniformity and obtain efficient resource management.
iii. Downsizing 1. Reduce the size of operations in order to be more efficient. Efficiency here means saving money. When a company downsizes, employees are let go. There is a staff reduction. 2. Reduction in size of operation means that the resource allocation has been shifted. The allocation of resources is tightened.
iv. Divestiture Divesting from an operation means getting out of that business. It does not mean going out of business, buy divest or get out of a certain field of operation. Usually, when a company grow, it tends to expand its operation. The new expanded operation may move away from the company’s core competence. When this expanded operation as a problem, the company tends to divest from the periphery operation and refocus on the core operation of the company. Do what you can do best.
i. Companies may come together and share their core competence through strategic alliance. Organizations come together to pursue a mutual interest.
ii. This type of alliances may take place in a form of supplier alliance or distribution alliance where firms come together to accomplish sales, distribution, and customer service.
This is about using the Internet to gain competitive advantage. Remember that competitive advantage comes from (1) differentiation, and (2) proprietary. i. B2B 1. Use the Internet to vertically link the organization with suppliers. In the old days, we use the preferred supplier system; however, today companies are moving towards auction. This is called outsourcing alliances.
2. The Internet opens up many opportunities for companies. Companies can now access suppliers from all over the world. The channel power may also be affected. Now, it is the suppliers who are competing for business with the companies. In the old days, companies would have to go out and look for preferred suppliers.
ii. B2C 1. Use the Internet to link the company or organization to customers. One strategy in this area is called e-tailing or selling goods directly to customers. 2. For the new economy companies, e-tailing is all that the company depends on when selling to customers. For old economy companies, e-tailing provides the company with business strategy mix.
i. Differentiation ii. Cost leadership iii. Focused differentiation iv. Focused cost leadership
Portfolio planning is seeking the best mix of investment among alternative business opportunities.
i. BCG matrix 1. BCG stands for Boston Consulting Group. It analyzes business opportunities according to market growth rate and market share. 2. In the BCG model, there are 4 types of types of business conditions: a. Stars b. Cash cows c. Question marks d. Dogs
ii. GE business screen 1. The key planning dimensions are business strength and industry attractiveness. Analysis is undertaken similar to SWOT analysis.
2. Use a two-way table plotting industry attractiveness against business strength & competitive position.
i. Prospector strategy ii. Defender strategy iii. Analyzer strategy
The managers actually don’t know what they are doing. They learn over time and develop their strategies over time.
Planning and Controlling
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1. Managers plan?
i. Define your objectives ii. Determine where you stand vis-à-vis objectives iii. Develop premises regarding future conditions iv. Analyze and among action alternatives v. Implement the plan and evaluate results
i. Planning improves focus and flexibility ii. Planning improves action orientation iii. Planning improves coordination iv. Planning improves time management v. Planning improves control
i. Establish objectives and standards ii. Measures actual performance iii. Compare results with objectives and standards iv. Take corrective action
i. Feed-forward controls ii. Concurrent controls iii. Feedback controls
i. Purchasing control ii. Inventory control iii. Statistical quality control
1. Specific 2. Time defined 3. Challenging 4. Measured ii. MBO process iii. MBO Pros and Cons
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Planning is a process of setting objectives and determining how to best accomplish them. Planning involves deciding exactly what you want to accomplish and how best to go about it.
When planning is done well, it creates a solid platform for further management efforts at organizing – allocating and arranging resources to accomplish essential tasks; leading – guiding the efforts of human resources to ensure high levels of task accomplishment; and controlling – monitoring task accomplishment and take necessary corrective action.
i. Define your objectives ii. Determine where you stand vis-à-vis objectives iii. Develop premises regarding future conditions iv. Analyze and among action alternatives v. Implement the plan and evaluate results
i. Planning improves focus and flexibility ii. Planning improves action orientation iii. Planning improves coordination iv. Planning improves time management v. Planning improves control
i. Short-range = 1 year or less ii. Intermediate-range = 1 – 2 years iii. Long-range = 3 or more years
i. Strategic plan Comprehensively addresses long-term directions for the organization. The management planning of this scope involves determining for the entire organization and then deciding on the actions and resource allocations to achieve them.
ii. Operational plan Address specific activities to implement strategic plans. o Production plan o Facilities plan o Marketing plan o Human resource plan
i. Policy A policy communicates broad guidelines for making decisions and taking action in specific circumstances.
ii. Rules and procedures These are plans that describe exactly what actions are to be taken in specific situations. They are often found stated in employee handbook or manuals as SOP: Standard Operating Procedures.
i. Budget A budget is a plan to commit resource to projects or activities. It can be in a form of money or other type of resources, i.e. equipment. o Fixed budget Allocate resources on the basis of a single estimate of costs. The estimate establishes a fixed pool of resources that can be used, but not exceeded, in support of specified purpose.
o Flexible budget This type of budgeting allows allocation of resource allocation when activity increases from one estimated level to the next.
ii. Zero-based budget An activity or project is budgeted as if it were brand new. There is no assumption that resources previously allocated to a project or activity will simply be continued in the future.
iii. Project schedule This is a single-use plan that identifies the activities required to accomplish a specific major projects. In each c
In each case, the project schedule would define specific task objectives, and activities to be accomplished.
A forecast is an attempt to predict the future. All good plan involves a forecast. Forecasting is a process of making assumption of what will happen in the future. o Quantitative o Qualitative
Identity alternative courses of action for use if and when circumstances change with time. Able to handle unplanned circumstances.
Identifies alternative future scenarios and make plans to deal with each. Answer the question of what if this happens, how would you solve the problem?
Use external comparisons to gain insight for planning. Learn from your competitor. If a competitor can compete with you, it must think that it has as good or better a plan then yours.
These professionals are skilled in all steps of the formal planning process, including the benchmarking and scenario-panning approaches expertise. Staff planners can bring focus to efforts to accomplish important, often strategic, planning tasks.
Include people who will be affected by the plan and/or whose help is needed to implement them.
Controlling is the process of measuring performance and taking action to ensure desired results. Controlling involves the following 4 steps: o Establish objective standards o Measure actual performance o Compare results with objectives and standards o Take corrective action as needed
See above.
i. Establish objectives and standards ii. Measures actual performance iii. Compare results with objectives and standards iv. Take corrective action 1. Management by exception Focus on managerial attention on substantial differences between actual and desired performance.
2. After-action review Formally review results to identify lessons learned in a completed project, task force, or special operation.
i. Feed-forward controls This is also known as preliminary controls. They are accomplished before a work activity begins. They ensure that objectives are clear, that proper directions are established, and that the right resources are available to accomplish them.
ii. Concurrent controls Sometime they are called steering controls. They monitor on-going operations and activities to make sure things are being done according to plans.
iii. Feedback controls They are also called post-action controls. They take place after work is completed. These types of control focus on the quality of end results rather than on inputs and activities.
i. Internal control This type of control allows the individuals and group to exercise self-discipline in fulfilling job expectations.
ii. External control Managers can take action to supervise the behavior of other people. External control occurs through personal supervision and the use of formal administrative systems.
In addition to salary compensation, the company may give additional incentive for good performance that exceeds expectation or goal. This helps build motivation among workers. There are two types: i. Pay for performance ii. Merit pay
i. Discipline This is the act of influencing behavior through reprimand.
ii. Progressive discipline This is the process of typing reprimands to the severity and frequency of misbehavior.
i. Liquidity ii. Leverage iii. Asset management iv. Profitability
i. Purchasing control ii. Inventory control iii. Statistical quality control
Management by objectives (MBO) is a structured process of regular communication in which a supervisor/team leader and subordinate/team member jointly set performance objectives and review results accomplished.
1. Specific 2. Time defined 3. Challenging 4. Measured
ii. MBO process
iii. MBO Pros and Cons 1. Pros o Focus on subordinate’s work efforts o Focus on supervisor’s support to subordinate o Build relationship among subordinate and supervisor o Enthusiasm
2. Cons o Tie MBO to pay o Focus too much on objectives o Excessive paperwork o Supervisor loses sight and telling subordinates to do things instead of rendering support
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